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Opinion: 9 Best Vanguard Funds for Retirees


If you are retired or on the verge of retirement and you want a relatively easy low cost investment that will not lead you astray, then your search should start with Vanguard Mutual Fund.

Let me be clear: this article is not a sales pitch. I don’t work for Vanguard and I have no relationship with the company other than the shareholders in their fund.

Read: To get rich investments, the power of time loses a lucky stock pick

Why Vanguard

More than $ 7 trillion under Vanguard’s management and it is the only mutual fund company that has a financial structure created for the benefit of shareholders in its mutual funds.

The company’s funds are known for low cost and low tax exposure that comes from low turnover. It goes without saying that vanguard funds are no-load funds. No sales commission, no sales pressure.

From Vanguard’s excellent funding proposal, here are nine that I prefer for retirees.

Vanguard is a short-term investment grade fund
VFSUX,

This is the first fund I and my wife invest in each year. In January, we withdraw our annual from long-term investments to cover our costs for the coming year. This is the fund where we keep our emergency cash.

Since this fund has no stock, our finances are significantly emotion-free. Whatever is happening in the stock market at any given moment, we know that it will not affect us until the next calendar year. If you don’t try to manage your money this way, I recommend it.

You will not be enriched in this fund, but you will probably earn about 100 times more than paying in a normal bank savings account (this is really disgusting!) 0.01% interest.

In the last 15 years, this fund has appreciated at 3.27%.

Read: It is never too late to have a happy retirement

Balanced funding: annoyingly beautiful

Balanced funds hold both stocks and bonds. Over the years their shareholders have been statistically more likely to succeed above average as investors.

Why is that? Because the fund has no magic of its own. This is because the combination of growth and stability may convince you to give up your money instead of deciding when to buy it and when to sell it.

None of the following eight balanced funds are typically designed to hold more than about 60% in equity. This means that they are not likely to suffer major losses in all-equity funds.

Any one of these can create a good one-fund portfolio for retirees. But don’t choose randomly; The difference is important.

Vanguard Target Retirement 2015
VTXVX,
+ 0.37%

If you are already retired, this fundraiser is behind you. With only 35% equity shares and (indirectly) more than 10,000 stocks and 24,000 bonds diversified, you won’t make too many mistakes. You will get some good measure of growth and stability.

If you like the target date concept but want a little more equity exposure, it’s easy to choose a variety that focuses on next year such as 2020 or 2025.

Vanguard Life Strategy Fund

These funds come in a variety of combinations of equity exposures ranging from 20% to 80%, although I will exclude the most aggressive from this discussion. All bonds in this fund, however, are investment grades. There is no garbage.

Life Strategy Income Fund
Vasiks,
+ 0.35%
Equity funds typically have about 20% of its portfolio, the rest is in bonds, probably suitable for investors with sufficient assets (in other words they think more than they need) and those who are very disguised capital markets.

Life Strategy Conservative Growth
VSCGX,
+ 0.39%
That equity doubles the share to about 0%, probably the right choice for conservative retirees who want something to grow but are not willing to go too far to get it.

LifeStrategy medium growth
VSMGX,
+ 0.48%
Very similar, but with 60/40 share of equity and bonds. It provides further growth, though still without much excitement.

Two funds for retirees who don’t know much about investing

Often over the last 20 years I have recommended Vanguard Wellesley Income Fund
VWIAX,
+ 0.24%
And / or Vanguard Wellington Fund
VWENX,
+ 0.25%.

For conservative retirees who I don’t know well, Wellesley has become what I consider to be my best advice.

Wellesley has been taking good care of investors since the 1970s. Its portfolio is typically 40% equity, 60% bonds. It is a low-cost, actively managed fund, consisting of about large large-cap stocks (mostly value stocks) and about 1,300 bonds.

For those who are less conservative, Wellington is my advice, especially for those who value a very long track record.

Wellington has been in business since 1929 and was the industry’s first balanced fund.

Wellington’s common 60/40 equity and bond dividends are invested by trustees of many large pension funds. They know they need reliable long-term growth and their portfolios must pay their pensioners in all circumstances.

Wellington is actively managed, with about 60 large-cap stocks and about 1,100 bonds.

Note: My wife and I prefer an overall 50/50 allocation of equity and bonds. If it appeals to you, you can achieve this by dividing your money equally between Wellesley and Wellington.

The other two vanguard balances are worth considering.

Vanguard Balanced Index Fund
VBIAX,
+ 0.34%
It is actively managed, with approximately 0% of its portfolio in U.S. growth, 00,000 U.S. growth-based stocks and the rest in about, 000 bonds.

Vanguard is a tax-managed balanced fund
VTMFX,
+ 0.20%
With a simple equity / bond split around 50/50, capital gains distribution and other taxable income are managed to decrease. If you prefer that allocation with a lower tax bill, this fund may be for you.

Returns and Risks

As you can see in the table below, the level of risk and return are actually linked, but not always exactly what you would expect.

The funds are listed with a compound annual growth rate of 15 years behind them (early October). For everyone, you’ll see its performance during 2008, the worst calendar year for investors in a long time.

Table 1: Comparison of vanguard funds

Funding

15 year return

200

Wellington

8.7%

-22.2%

Balanced index

8.33%

-22.1%

Tax-managed balance

7.51%

-18.32%

Wellesley income

7.26%

-9.79%

Life Strategy Moderate

6.65%

-26.5%

Target Retirement 2015 *

5.99%

-24.1%

Life Strategy Conservative

5.69%

-19.52%

Life Strategy Earnings

4.73%

-10.53%

Short-term investment grade

3.27%

-4.65%

* The statistics of this fund reflect a time when the fund was more aggressively allocated than it is now.

For more of this fund (four all-equity funds), check out a video presentation I made last year: “My 12 favorite vanguard funds for retirees.”



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